Question on Notice – Payment in Lieu of Rates (PiLoR) scheme

Legislative Council, Tuesday 11 August 2026

Ms FORREST question to the LEADER for the GOVERNMENT in the LEGISLATIVE COUNCIL, Ms RATTRAY

• With regard to the Payment in Lieu of Rates (PiLoR) scheme for renewable energy generation, consistent with Victoria and other states can the Treasurer respond to the following questions:
• Would applying the Victorian-style PiLoR formula ($67,270 base plus $1,515 per MW) to Hydro’s generating fleet yield an amount broadly equivalent to what Hydro currently pays as its rate equivalent?
• Has Treasury considered the PiLoR formula against Hydro’s installed generating capacity and comparing it to the actual rate equivalent currently paid?
  • If so, will the Treasurer table that comparison; and
  • If Treasury has not undertaken this comparison, will the Treasurer commit to doing so and reporting the result, given it goes directly to whether the current rate equivalent methodology reflects a fair, market-consistent value?
• Does the Treasurer accept that the existence of a rate equivalent mechanism for Hydro Tasmania, designed specifically to replicate the rates a private, taxable generator would pay, establishes the in-principle case that privately owned renewable generators should be rated on a comparable, transparent, formula-based basis (i.e. PiLoR), rather than through the bespoke land valuation approach currently applied only to windfarms?
• What, if any, fiscal modelling has Treasury undertaken on the Budget and local government revenue implications of formally adopting PiLoR for privately owned renewable generation in Tasmania, including any consequential effect on how Hydro Tasmania’s own rate equivalent obligation would be calculated under a consistent methodology?
• 5.1 How often is the rate equivalent paid by Hydro Tasmania calculated and reviewed and  does the Treasurer believe that bespoke, non-formula valuation approach risks producing inconsistent or declining returns over time, in contrast to a price-indexed, per-MW PiLoR rate; and
  • if not, why not?

Answers:

1. On an indicative basis, applying the Victorian Government’s 2025-26 indexed Payment in Lieu of Rates (PiLoR) methodology to Hydro Tasmania’s generation fleet would result in a payment that is broadly equivalent to the amount payable under the current Hydro rates equivalent framework.
   Hydro Tasmania’s 2025 Annual Report indicates total generating capacity of around 2 670 MW across its 31 hydro and thermal power stations.
   Notionally applying the Victorian methodology, comprising a fixed amount of $67 270 per power station plus $1 515 per MW of generating capacity, would produce an indicative payment of approximately $6.1 million per annum.
   This compares with Hydro’s actual 2025‑26 rates equivalent payment of $6.1 million.
   This comparison is indicative only and has been prepared solely for the purpose of comparing the Victorian PiLoR methodology with the State’s existing rates equivalent arrangements for Hydro.
2. Treasury has not undertaken that comparison.
   2.1. The only comparison undertaken is the illustrative calculation provided in response to Question 1.
   2.2. No. Treasury does not consider a comparison between Hydro Tasmania’s rates equivalent arrangement and Victoria’s PiLoR framework to be an appropriate basis for assessing the State’s current rates equivalent framework for Hydro, as the two arrangements were established for different purposes and operate in different legislative, ownership and policy contexts.
3. The premise that Hydro Tasmania’s rates equivalent arrangement establishes an in principle case for a PiLoR-style framework for privately owned renewable generators is not accepted.
   Hydro Tasmania’s rates equivalent reflects its unique position as a Government-owned entity with land exempt from rates under legislation and is designed to maintain competitive neutrality.
   Privately owned generators do not raise this issue and are governed by the existing rating framework. Policy responsibility sits with the Local Government and Energy portfolios, not the Treasurer.
4. Treasury has not undertaken fiscal modelling of the Budget or local government revenue implications of formally adopting a PiLoR-style framework for privately owned renewable generation in Tasmania.
   As PiLoR payments are generally intended to provide a revenue stream to local government rather than the State Budget, any fiscal impacts would depend on the design of any such framework and have not been assessed.
   Treasury has also not modelled any consequential changes to Hydro Tasmania’s rates equivalent obligation under a hypothetical PiLoR-based methodology.
   As outlined in response to Question 1, an illustrative application of the Victorian formula produces a broadly equivalent amount to the State’s current rates equivalent framework. Treasury has not undertaken further modelling beyond that illustrative comparison.
5. 5.1. Hydro Tasmania’s rates equivalent payment is calculated annually and paid by 31 December each year, with the amount determined by applying an indexation rate to the previous year’s payment.

The current methodology is not a bespoke valuation of Hydro Tasmania’s assets each year. It is an indexed, formula-based approach, reflecting the average increase in relevant council rates revenue.
The broader methodology was last reviewed in June 2022, when Treasury considered a range of alternative approaches. The preferred approach was to retain the existing methodology on the basis that it best reflects the intent of the rates equivalent arrangement and continued to provide a simple, transparent and reasonably justifiable basis consistent with broader taxation principles.
On that basis, I do not accept the characterisation that the current arrangement is a bespoke, non-formula valuation approach.

5.2 The premise of the question is not accepted.
Hydro Tasmania’s rates equivalent payment is calculated using a formula‑based indexation methodology, rather than a bespoke valuation approach. The use of indexation linked to growth in council rates revenue provides a stable and predictable basis for the payment over time.
Further, as outlined in response to Question 1, an indicative application of the Victorian PiLoR methodology produces a payment that is broadly equivalent to the amount payable under the current Tasmanian framework
Accordingly, there is no evidence that the current arrangement is producing materially different outcomes, or that it risks producing inconsistent or declining returns relative to a PiLoR-style methodology.

https://www.hydro.com.au/sites/default/files/2026-01/hydro-tasmania-annual-report-2025.pdf